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F O U R T H E D I T I O N Process Measurement and Analysis © The McGraw-Hill Companies, Inc., 2003 chapter 5 DAVIS AQUILANO CHASE PowerPoint Presentation.

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Presentation on theme: "F O U R T H E D I T I O N Process Measurement and Analysis © The McGraw-Hill Companies, Inc., 2003 chapter 5 DAVIS AQUILANO CHASE PowerPoint Presentation."— Presentation transcript:

1 F O U R T H E D I T I O N Process Measurement and Analysis © The McGraw-Hill Companies, Inc., 2003 chapter 5 DAVIS AQUILANO CHASE PowerPoint Presentation by Charlie Cook

2 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–2 Chapter Objectives Illustrate how all activities within an organization are actually processes that need to be managed. Present the various measures of performance that can be used to evaluate a process. Show how process analysis can provide managers with an in-depth understanding of how a process is performing, while at the same time identifying areas for improvement. Present the concept of service blueprinting and illustrate how it is used to evaluate processes within a service environment.

3 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–3 Chapter Objectives (contd) Introduce the concept of business processes and show how they are providing managers with a broader perspective for managing their organizations. Present the concepts of benchmarking and reengineering and show their roles in creating world- class operations.

4 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–4 Managerial Issues Recognizing that every set of activities represents a process to be managed. Acknowledging that processes are linked to other processes in other functional areas. Choosing strategically critical performance measures by which to monitor processes so that corrective actions are taken when needed. Using benchmarking to identify ways in which to create or improve world-class design, production and delivery operations for products.

5 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–5 Defining a Process Selecting a Process –Identifying the strengths and weaknesses of each processs capability to support the strategic focus of the firm on particular market segments. Standardization Flexibility Customization Speed of delivery

6 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–6 Process Flowcharts for Making Hamburgers Exhibit 5.1a

7 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–7 Process Flowcharts for Making Hamburgers Exhibit 5.1b

8 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–8 Relative Comparison of Hamburger Preparation Processes Exhibit 5.2

9 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–9 Process Measurement Importance of Measuring Processes –Is the basis for good managementIf you cant measure it, you cant manage it. –Allows a firm to determine if its strategically important goals and standards are being met. –Allows for performance comparisons with other competing firms.

10 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–10 Types of Performance Measures Productivity –The operational efficiency with which inputs are transformed (converted) into outputs. A relative measure that becomes meaningful when compared to itself over time, similar operations internally, or externally within its industry. –Partial measures of productivity can be taken using the various inputs (e.g., labor, energy, and materials) that are combined to create a product.

11 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–11 Partial Measures of Productivity Exhibit 5.3

12 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–12 Types of Performance Measures (contd) Capacity –Output of a process in a given period of time units of output per unit of time. –Design capacity The ideal output rate at which the firm would like to produce under normal circumstances and for which the system was designed. –Maximum capacity The maximum potential output rate that could be achieved when productive resources are used to their maximum.

13 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–13 Types of Performance Measures (contd) Capacity Utilization –Percentage of available capacity actually used. Design capacity versus maximum capacity capacity Design output Actual Capacity Utilization available hours machine Total used hours machine Actual Capacity Utilization Homogeneous output Variable output

14 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–14 Measures of Capacity Exhibit 5.4

15 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–15 Types of Performance Measures (contd) Quality –Usually measured by the defect rate of the products produced. Speed of Delivery –Products lead timeamount of time from when product is ordered to when it is shipped. Inventoried versus customized products –Variability/Uncertainty in delivery time Less uncertainty in delivery times is better.

16 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–16 Types of Performance Measures (contd) Flexibility –The measure of how readily a firms transformation process can adjust to changes in customer demand (i.e., agile manufacturing). Flexibility Measures –How quickly a process can convert from producing one product to another product. –How quickly a process can adjust to changes in volume (demand). –How capable is the process in producing more than one type of product.

17 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–17 Types of Performance Measures (contd) Process Velocity (Manufacturing Velocity) –Ratio of total throughput time for a product to the value-added time. Throughput timethe time the product spends in the process. Value-added timethe time it takes to complete the product. Value-added time time throughput Total velocity Process =

18 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–18 Process Analysis in Manufacturing Multistage Process –A process that consists of more than one step. Hybrid Process –A multistage process that consists of more than one type of process. Make-to-Stock –Process for making highly standardized products for finished goods inventory. Make-to-Order –Process for making customized products to meet individual customer requirements.

19 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–19 Manufacturing: Make-to-Stock Exhibit 5.5a

20 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–20 Manufacturing: Make-to-Order Exhibit 5.5b

21 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–21 Process Analysis in Manufacturing Modularization –Use of standard components and subassemblies to produce customized products. Tightness and Dependence –The degree to which various process stages are related. Tight process are highly related, creating strongly dependence between the stages. –Buffer inventories can make a process looser.

22 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–22 Manufacturing: Modularization Exhibit 5.5c

23 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–23 Process Analysis in Manufacturing Bottleneck –A stage with the lowest output capacity that limits the total output of the process. Capacity versus Demand –Capacity is the firms output capability; demand is the level of output that the market requires to meet customer needs.

24 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–24 Process Analysis in Manufacturing Process Flowcharts –A schematic diagram for describing a process. What the official or documented method is. How the work is actually being performed. What the proper procedures should be.

25 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–25 Elements in a Process Flowchart Exhibit 5.6

26 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–26 Process Analysis in Services Service Blueprinting –The process of flowcharting for services that includes the customer: Identifying (mapping) processes Isolating fail points Establishing a time frame Analyzing profitability Line of visibility –Above the line: stages in process, in direct contact with customer, that focus on providing good service. –Below the line: stages in the process, not in contact with the customer, that focus on process efficiency.

27 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–27 Service Blueprint for a Cash Account at a Discount Brokerage Exhibit 5.7 Source: Adapted from G. Lynn Shostack, Designing Services That Deliver, Harvard Business Review 62, no. 1 (January–February 1984), p. 138.

28 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–28 Blueprint for a Corner Shoeshine Exhibit 5.8 Source: Reprinted by permission of Harvard Business Review. Exhibit from Adapted from Designing Services That Deliver by G. Lynn Shostack, January–February 1984, p. 134. Copyright © 1984 by the President and Fellows of Harvard College; all rights reserved.

29 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–29 Shoeshine Profitability Analysis Exhibit 5.9 Source: Reprinted by permission of Harvard Business Review. Exhibit from Adapted from Designing Services That Deliver by G. Lynn Shostack, January–February 1984, p. 135. Copyright © 1984 by the President and Fellows of Harvard College; all rights reserved.

30 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–30 Process Analysis in Services (contd) Failsafing –Creating a control condition where the customer, server, or process can take only the correct (or desired) action while engaged in a service process.

31 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–31 Business Processes Business Process –A logical set of tasks or activities that crosses functional boundaries and recognizes its interdependence with other processes or businesses. Examples of Business Processes Exhibit 5.10

32 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–32 Business Process Analysis Define the Process Boundaries –Identify where the process begins and where it ends (its boundaries). –Determine its inputs and outputs. –Recognize other processes that impact on the process under evaluation. Link the Process to the Corporate Strategy –Understand how the process contributes to the firms competitive advantage. –Identify key measures to be used evaluate the process.

33 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–33 Measures of Performance for Specific Business Processes Exhibit 5.11

34 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–34 Business Process Analysis (contd) Map the Process –Develop a process flow chart to provide a visual context for analyzing the process: Specific ordering of the process steps Length of time each step takes Resources required by each step Cross-functional relationships Granularity –Describes the level of detail that is used in analyzing a process.

35 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–35 Process Mapping with Functional Areas Exhibit 5.12

36 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–36 BenchmarkingBenchmarking Benchmarking –Comparison of a companys measures of performance with those of firms that are considered to be world class. –The search of the best practices that leads to superior performance. –Involves continuous monitoring/measurement. –Applicable to all functional areas: Goods and services Business processes Performance measures

37 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–37 Key Steps in Benchmarking Planning –Determining where we should bench mark. Analysis –Obtaining an in-depth understanding of the firm. Integration –Defining target areas for change. Action –Incorporating findings into current processes. Maturity –Having best practices at all organizational levels.

38 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–38 Types of Benchmarking Internal Benchmarking –Comparison of similar operations within the firm Competitive Benchmarking –Comparison with like operations of competitors Functional Benchmarking –Comparison with the best of breed in a specific function, regardless of industry Generic Benchmarking –Adopting the innovative processes of industry leaders in commonly-held practices

39 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–39 Benchmarking Process Steps Exhibit 5.12 Source: Robert C. Camp, Benchmarking: The Search for Industry Best Practices That Lead to Superior Performance, (Milwaukee, WI: ASQC Quality Press, 1989).

40 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–40 Business Process Reengineering Reengineering –The process of rethinking and restructuring an organization Characteristics of a Reengineered Process –Several jobs are combined into one. –Workers make decisions. –The steps in the process are performed in a natural order. –Processes have multiple versions (flexibility). –Work is performed where it makes the most sense.

41 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–41 Business Process Reengineering Issues with Reengineering –Inability of management to link reengineering efforts to overall corporate strategy. –Reengineering is regarded as a tactical program rather than as a strategy issue for the entire organization. –Lack of commitment and participation by top management.

42 Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., 20035–42 Comparison between Strategic and Tactical Deployment Techniques for Reengineering Exhibit 5.13 Source: Gateway Management Consulting


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